Indian micro, small, and medium enterprises (MSMEs) are bracing for the impact of the European Union’s (EU) latest green regulations, the Corporate Sustainability Due Diligence Directive (CSDDD), following the recent implementation of the Carbon Border Adjustment Mechanism (CBAM). Both regulations aim to raise global sustainability standards, but their implications for developing nations, particularly India, are raising concerns. 

CSDDD, effective from July 2024, mandates companies to meet human rights and environmental obligations throughout their supply chains. This applies to non-EU companies with over €450 million in EU annual turnover. While it aims to make businesses more accountable, Indian exporters fear that the regulation could impose significant compliance costs. 

Similarly, CBAM, launched in October 2023, targets carbon-intensive imports by levying tariffs to match EU-produced goods’ carbon costs. This regulation is seen as a step to curb “carbon leakage,” where companies shift production to countries with less stringent emissions policies. 

Industry estimates suggest that CBAM could affect 43% of India’s exports to the EU, particularly in carbon-heavy sectors like iron, steel, and aluminum. Compliance costs could rise by 20-35%, threatening India’s export competitiveness. 

Many Indian MSMEs fear that these sustainability reporting and ESG obligations could disproportionately burden them. With limited resources, Indian businesses are calling for more equitable solutions that acknowledge their economic challenges, ensuring that net-zero ambitions do not stifle growth. 

As Indian industries adapt to these changes, the regulations serve as a wake-up call for businesses to integrate sustainable practices into their operations and supply chains, despite the challenges ahead. 

Sources: 

https://www.outlookbusiness.com/magazine/magazineeuropean-union-new-green-rule-csddd-india-msmes 

https://www.indiabusinesstrade.in/blogs/in-eus-sustainability-law-a-new-challenge-for-indian-exporters/